Airbnb Could Soon Do $1 Billion A Year In Revenues

Published 7:40 pm, Thursday, January 24, 2013

Airbnb, the online marketplace for spare rooms and other unconventional lodging, is poised for rapid growth, according to Michael Pachter, an analyst at Wedbush Securities.

In a recent Forbes cover story on Airbnb, Pachter estimated that Airbnb rented 12 million to 15 million room-nights in 2012. Pachter thinks that could increase to 100 million nights "eventually"—at which point it could be generating $1 billion a year in revenues.

(Pachter is the analyst who famously railed against the hoodie that Facebook CEO Mark Zuckerberg wore on his IPO roadshow. He didn't offer commentary on the wardrobe of Airbnb CEO Brian Chesky, who's more fond of tight-fitting sweaters.)

Airbnb is clearly on a hockey-stick growth curve. It had booked 5 million cumulative nights by February 2012; by June, it had doubled that to 10 million.

For comparison, the US hotel industry does more than a billion room nights a year.

Airbnb gets most of its revenues from booking fees; it charges 3 percent to hosts who list a space, and 6 to 12 percent to guests. So if you assume an average rate of $100 a night and an average fee of 10 percent on those bookings, it's pretty easy to see the math behind Pachter's projection.

Not all has been smooth at Airbnb recently. Last summer, four talented early employees left—a small portion of total headcount, but significant losses nonetheless. In October, reports surfaced that Airbnb was raising a new round of financing from Facebook backer Peter Thiel at a $2.5 billion valuation, but the company never confirmed that deal and little has been heard since. And most recently, Sequoia Capital, which led an early seed investment in Airbnb, announced that Greg McAdoo, who serves on Airbnb's board of directors, is leaving the firm. (He will presumably be replaced by another Sequoia partner.)

Airbnb also continues to struggle with local regulations, especially in San Francisco and New York, which essentially forbid many of the short-term rentals the site facilitates.

Still, the company has raised a large amount of capital and seems to have a lot of growth ahead, per Pachter's predictions.